Primary quiet; LeasePlan sets guidance; recent Charter busy, higher; most energy names off

By Paul Deckelman and Paul A. Harris

New York, Feb. 10 – The high-yield primary sphere was quiet on Wednesday, with no issues seen having priced and no new deals announced.

Syndicate sources did report that Dutch vehicle-leasing company LeasePlan Corp. NV had set guidance on its €1.55 billion equivalent three-part offering, which includes a dollar-denominated tranche of five-year notes as well as two tranches of euro-denominated paper, with its international roadshow set to wrap up on Thursday.

Back among the strictly dollar-denominated recent new issues, Charter Communications Inc.’s eight-year megadeal, which priced last Thursday, was the day’s busiest credit in Junkbondland, trading at firmer levels.

There was also some slight upside movement seen – though on not much volume – in the new Manitowoc Co. Inc. and Manitowoc Foodservice, Inc. notes.

Away from new or recent deals, Chesapeake Energy Corp.’s notes continued to slide after giving up some short-lived gains they had notched early in the session. Other oil and natural gas credits such as Denbury Resources Inc. and Targa Resources Partners LP were also lower, although here and there gainers such as Concho Resources Inc. were also seen.

Statistical measures of junk market performance were mixed for a second straight session on Wednesday, their fifth mixed session in the last six trading days.

LeasePlan guides €1.55 billion

There were no issues priced on Wednesday.

LeasePlan set guidance on its €1.55 billion three-part offering of senior secured notes (B1/BB+/BB-) late in the New York day.

The deal includes euro-denominated five-year notes talked to yield 7½% to 7¾% and dollar-denominated five-year notes talked to yield in the 8¼% area.

The dollar-denominated notes, talked 62.5 basis points behind the euro-denominated notes, are shaping up slightly wide of the 50 bps spread that circulated in earlier guidance, according to a sellside source.

LeasePlan is also selling euro-denominated seven-year notes talked to yield 8% to 8¼%.

The guidance on the seven-year notes shapes up 50 bps behind that of the euro-denominated five-year notes, a greater concession than the issuer initially contemplated, according to the sellsider, who said that early guidance had the seven-year notes coming about 30 bps behind the euro-denominated five-year piece.

The buyout deal has seen some pushback from investors because of the volatility in the European financial space and intense pressure on bank stocks as well as recent negative headlines about the fortunes of Deutsche Bank, the sellsider remarked.

LeasePlan's international roadshow is scheduled to end on Thursday.

Joint bookrunner JPMorgan will bill and deliver. Goldman Sachs, Credit Suisse and ING are also joint bookrunners.

The only other deal in the market at Wednesday's close, Solera, LLC's $2.03 billion equivalent offering of eight-year senior notes in tranches of euro-denominated and dollar-denominated notes, is on a full roadshow and not expected to price until the Feb. 22 week.

Early on, the proposed dollar-denominated notes have been discussed from the mid-to-high 9% range to the 10% area, sources say.

Charter tops volume list

In the secondary realm, a trader noted that Charter Communications’ new 5 7/8% notes due 2024 “were clearly the most active” credit.

He called the bonds up by “¼ point or so,” trading in a 98¾-to-99 bid context.

“They were not really moving, pricewise, but had a decent amount of volume,” he said.

A second trader agreed that Charter “was the busiest one,” with over $50 million having changed hands in a 98¾-to-99½ bid context.

The Stamford, Conn.-based cable operator priced its $1.7 billion of the those notes via its CCO Holdings LLC and CCO Holdings Capital Corp. subsidiaries at par last Thursday after that quick-to-market offering was upsized from an originally announced $1.5 billion.

Another market source said Wednesday that while the bonds were trading well in from that pricing level, pegging them at 99¼ bid, they were up ¾ point on the session from where they had been on Tuesday. He also said that volume was over $50 million, topping the high-yield Most Actives list.

The existing CCO Holdings 5¼% notes due 2022 meantime gained ¾ point, going home at par bid.

Manitowoc issues firmer

Also among recently priced junk offerings, a trader said that the new Manitowoc Foodservice 9½% notes due 2024 were trading up around the 101 mark, up around 3/8 to ½ point from where those bonds went home on Tuesday.

He said that he saw “a few trades, a few round-lot trades,” around that 101 bid level, “but not huge volume.”

At the same time, he said he had not seen any dealings in the Manitowoc 12¾% senior secured second-lien notes due August 2021, which had priced on Monday at 95.32 to yield 14%.

“I don’t know if we’ll ever see those,” he added, noting the dearth of any real activity in that issue.

At another shop, a trader did quote the latter issue at 96 bid, 97 offered, calling the notes up ½ point from where they had been seen on Tuesday.

Manitowoc, a Wisconsin-based manufacturer of cranes and other industrial lifting equipment, as well as commercial food-service equipment, is issuing the two series of bonds as part of the financing for its pending spinoff of the New Port Richey, Fla.-based food-service division, which makes commercial stoves, ovens, refrigeration and beverage dispensing equipment.

It priced $425 million of the food service notes at par on Friday in a regularly scheduled forward calendar deal. It followed that up with Monday’s pricing of the $260 million of the cranes division bonds, another forward calendar offering, after the issue was upsized from $250 million originally and its tenor cut back to 5.5 years from the originally planned eight-year maturity.

Besides that change and pricing the bonds at a deep discount to further fatten the yield from the already-generous coupon, the company also made covenant changes restricting its ability to borrow further money in order to persuade investors to get on board.

Proceeds from the food service bonds and from a concurrent new term loan financing will be used to fund a $1.39 billion dividend to the parent company. That dividend and the proceeds of the parent’s new secured bond deal will in turn be used to repay its several issues of existing bonds and bank debt and for general corporate purposes.

Existing bonds trade back up

One of those existing Manitowoc bond issues – its 5 7/8% notes due 2022 – was actively traded on Wednesday, with over $14 million having changed hands.

The issue went out at 110 3/8 bid. That was about where the bonds had traded earlier in the week, though well up from the levels around 107¾ at which the bonds had been quoted on Tuesday on a handful of smallish odd-lot trades.

Energy names mostly lower

Away from the new deals and related credits, a trader said that “today a bunch of bonds were trading down” including “Targa and a number of other energy names.”

He saw Houston-based midstream energy assets company Targa’s 6¾% notes due 2024 down about 6 points on the day at 68 bid, even though “my [pricing] service said they should be around 74 or 75½.”

He also saw Targa’s 5% notes due 2018 down 3½ points on the day at 82½ bid.

At another desk, a trader also saw Targa’s 6¾% notes at 68 bid but called that a nearly 7-point loss on the day, although he noted that there were only a handful of large-sized trades in the credit.

A trader said that Denbury Resources’ 6 3/8% notes due 2021 were “one of the big movers to the downside,” seeing them down by around 8 points at 22 bid.

A second trader quoted the Plano, Texas-based oil and natural gas exploration and production company’s issue at 22¼ bid, calling them down 8¼ points on over $16 million of turnover.

He saw no fresh news unique to the company that might account for that larger-than-usual drop.

Oil prices continue slide

Traders noted that oil prices remained pretty much in the doldrums on Wednesday, although the market did show some signs of strength.

For instance, the European benchmark grade, Brent crude for April delivery, actually finished better on the London ICE Futures Exchange, rising 52 cents per barrel to settle at $30.84. It was the first upturn in Brent after four straight losses.

However, the benchmark U.S. grade, West Texas Intermediate crude for March delivery, suffered its fifth consecutive setback in New York Mercantile Exchange dealings Wednesday. While the contract initially firmed smartly and reached a morning high of $29.22 per barrel, well up from Tuesday’s close at $27.94, that rally proved to be short-lived. Recent investor concerns about the oversupply glut and still-sluggish economic activity in major oil buyer China and other global buyers drove out that early optimism, with WTI ultimately ending down 49 cents per barrel at $27.45.

Chesapeake cheapens up

That somber backdrop was also seen as a factor in the continued slide in Chesapeake Energy’s bonds. Those bonds have been getting clobbered all week ever since word got out that the company had hired advisers to help it restructure its debt, leading to market fears of a possible upcoming bankruptcy, even though the big Oklahoma City-based natural gas and oil producer explicitly denied having any such plans.

Chesapeake’s 8% notes due 2022, which had been trading in the 40s last week but suffered big losses on both Monday and Tuesday, retreated further on Wednesday, going home at 33½ bid, a trader said, down 2½ points. More than $38 million of those bonds changed hands during the session, second only to the aforementioned Charter Communications eight-year notes.

Chesapeake’s New York Stock Exchange-traded shares meantime replicated the bonds’ fall, plummeting by 25 cents, or 12.82%, to close at $1.70 per share on better-than-average volume.

Some energy gainers

The picture wasn’t entirely bleak in the energy universe. A trader saw Concho Resources’ 5½% notes due 2023 up 1½ points on the session, closing above the 85 level.

Another market source saw the Midland, Texas-based exploration and production operator’s paper up more than 1¼ points at 85¼ bid, on busy volume of over $11 million.

Indicators stay mixed

Statistical measures of junk market performance were mixed for a second straight session on Wednesday, their fifth mixed session in the last six trading days. They had turned mixed on Tuesday after having been lower across the board Monday.

The KDP High Yield Daily index rose by 18 basis points on Wednesday to 61.60, rebounding from Tuesday’s 40 bps drop and Monday’s 71 bps plunge. It was the first gain after seven consecutive losses; before those losses, it had risen for seven straight sessions.

Its yield came in by 3 bps to 7.57%, its first narrowing after having risen by 9 bps on Tuesday and having ballooned out by 22 bps on Monday. Those were the yield’s first widenings after having come in over the previous two sessions.

The Markit Series 25 CDX North American High Yield index, on the other hand, lost 5/32 point on Wednesday to end at 96 31/32 bid, 97 1/32 offered after having edged upward by 1/32 point on Tuesday. Wednesday was its fourth loss in the last five sessions.

The Merrill Lynch North American High Yield Master II index posted its first gain after three consecutive setbacks, improving by 0.309%. On Tuesday, it had backtracked by 0.505%. Wednesday marked the index’s second advance in the last five sessions.

That cut its year-to-date loss to 4.069%, down from Tuesday’s 4.364%, its worst cumulative loss for the year so far.

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